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306
70 S.Ct. 652
94 L.Ed. 865
MULLANE
v.
CENTRAL HANOVER BANK & TRUST CO. et al.
No. 378.
Argued and Submitted Feb. 8, 1950.
Decided April 24, 1950.
Thus the only notice required, and the only one given, was by newspaper
publication setting forth merely the name and address of the trust company, the
name and the date of establishment of the common trust fund, and a list of all
participating estates, trusts or funds.
6
At the time the first investment in the common fund was made on behalf of
each participating estate, however, the trust company, pursuant to the
requirements of 100-c(9), had notified by mail each person of full age and
sound mind whose name and address was then known to it and who was
'entitled to share in the income therefrom * * * (or) * * * who would be entitled
to share in the principal if the event upon which such estate, trust or fund will
become distributable should have occurred at the time of sending such notice.'
Included in the notice was a copy of those provisions of the Act relating to the
sending of the notice itself and to the judicial settlement of common trust fund
accounts.
Upon the filing of the petition for the settlement of accounts, appellant was, by
order of the court pursuant to 100-c(12), appointed special guardian and
attorney for all persons known or unknown not otherwise appearing who had or
might thereafter have any interest in the income of the common trust fund; and
appellee Vaughan was appointed to represent those similarly interested in the
principal. There were no other appearances on behalf of any one interested in
either interest or principal.
Appellant appeared specially, objecting that notice and the statutory provisions
for notice to beneficiaries were inadequate to afford due process under the
Fourteenth Amendment, and therefore that the court was without jurisdiction to
render a final and binding decree. Appellant's objections were entertained and
overruled, the Surrogate holding that the notice required and given was
sufficient. 75 N.Y.S.2d 397. A final decree accepting the accounts has been
entered, affirmed by the Appellate Division of the Supreme Court, In re Central
Hanover Bank & Trust Co., 275 App.Div. 769, 88 N.Y.S.2d 907, and by the
Court of Appeals of the State of New York, 299 N.Y. 697, 87 N.E.2d 73.
The effect of this decree, as held below, is to settle 'all questions respecting the
management of the common fund.' We understand that every right which
beneficiaries would otherwise have against the trust company, either as trustee
of the common fund or as trustee of any individual trust, for improper
management of the common trust fund during the period covered by the
accounting is sealed and wholly terminated by the decree. See Matter of
Hoaglund's Estate, 194 Misc. 803, 811812, 74 N.Y.S.2d 156, 164, affirmed
272 App.Div. 1040, 74 N.Y.S.2d 911, affirmed 297 N.Y. 920, 79 N.E.2d 746;
Matter of Bank of New York, 189 Misc. 459, 470, 67 N.Y.S.2d 444, 453;
Matter of Security Trust Co. of Rochester, 189 Misc. 748, 760, 70 N.Y.S.2d
260, 271; Matter of Continental Bank & Trust Co., 189 Misc. 795, 797, 67
N.Y.S.2d 806, 807808.
10
We are met at the outset with a challenge to the power of the Statethe right of
its courts to adjudicate at all as against those beneficiaries who reside without
the State of New York. It is contended that the proceeding is one in personam
in that the decree affects neither title to nor possession of any res, but adjudges
only personal rights of the beneficiaries to surcharge their trustee for negligence
or breach of trust. Accordingly, it is said, under the strict doctrine of Pennoyer
v. Neff, 95 U.S. 714, 24 L.Ed. 565, the Surrogate is without jurisdiction as to
nonresidents upon whom personal service of process was not made.
11
Distinctions between actions in rem and those in personam are ancient and
originally expressed in procedural terms what seems really to have been a
distinction in the substantive law of property under a system quite unlike our
own. Buckland and McNair, Roman Law and Common Law, 66; Burdick,
Principles of Roman Law and Their Relation to Modern Law, 298. The legal
recognition and rise in economic importance of incorporeal or intangible forms
of property have upset the ancient simplicity of property law and the clarity of
its distinctions, while new forms of proceedings have confused the old
procedural classification. American courts have sometimes classed certain
actions as in rem because personal service of process was not required, and at
other times have held personal service of process not required because the
action was in rem. See cases collected in Freeman on Judgments, 1517 et
seq. (5th ed.).
12
chosen procedure, the interest of each state in providing means to close trusts
that exist by the grace of its laws and are administered under the supervision of
its courts is so insistent and rooted in custom as to establish beyond doubt the
right of its courts to determine the interests of all claimants, resident or
nonresident, provided its procedure accords full opportunity to appear and be
heard.
13
Quite different from the question of a state's power to discharge trustees is that
of the opportunity it must give beneficiaries to contest. Many controversies
have raged about the cryptic and abstract words of the Due Process Clause but
there can be no doubt that at a minimum they require that deprivation of life,
liberty or property by adjudication be preceded by notice and opportunity for
hearing appropriate to the nature of the case.
14
15
Personal service of written notice within the jurisdiction is the classic form of
notice always adequate in any type of proceeding. But the vital interest of the
State in bringing any issues as to its fiduciaries to a final settlement can be
served only if interests or claims of individuals who are outside of the State can
somehow be determined. A construction of the Due Process Clause which
would place impossible or impractical obstacles in the way could not be
justified.
16
Against this interest of the State we must balance the individual interest sought
to be protected by the Fourteenth Amendment. This is defined by our holding
that 'The fundamental requisite of due process of law is the opportunity to be
heard.' Grannis v. Ordean, 234 U.S. 385, 394, 34 S.Ct. 779, 783, 58 L.Ed. 1363.
This right to be heard has little reality or worth unless one is informed that the
matter is pending and can choose for himself whether to appear or default,
acquiesce or contest.
17
The Court has not committed itself to any formula achieving a balance between
these interests in a particular proceeding or determining when constructive
notice may be utilized or what test it must meet. Personal service has not in all
circumstances been regarded as indispensable to the process due to residents,
and it has more often been held unnecessary as to nonresidents. We disturb
none of the established rules on these subjects. No decision constitutes a
controlling or even a very illuminating precedent for the case before us. But a
few general principles stand out in the books.
18
19
But when notice is a person's due, process which is a mere gesture is not due
process. The means employed must be such as one desirous of actually
informing the absentee might reasonably adopt to accomplish it. The
reasonableness and hence the constitutional validity of any chosen method may
be defended on the ground that it is in itself reasonably certain to inform those
affected, compare Hess v. Pawloski, 274 U.S. 352, 47 S.Ct. 632, 71 L.Ed. 1091,
with Wuchter v. Pizzutti, 276 U.S. 13, 48 S.Ct. 259, 72 L.Ed. 446, 57 A.L.R.
1230, or, where conditions do not reasonably permit such notice, that the form
chosen is not substantially less likely to bring home notice than other of the
feasible and customary substitutes.
20
Nor is publication here reinforced by steps likely to attract the parties' attention
to the proceeding. It is true that publication traditionally has been acceptable as
notification supplemental to other action which in itself may reasonably be
expected to convey a warning. The ways or an owner with tangible property are
such that he usually arranges means to learn of any direct attack upon his
possessory or proprietary rights. Hence, libel of a ship, attachment of a chattel
or entry upon real estate in the name of law may reasonably be expected to
come promptly to the owner's attention. When the state within which the owner
has located such property seizes it for some reason, publication or posting
affords an additional measure of notification. A state may indulge the
assumption that one who has left tangible property in the state either has
abandoned it, in which case proceedings against it deprive him of nothing, cf.
Anderson National Bank v. luckett, 321 U.S. 233, 64 S.Ct. 599, 88 L.Ed. 692,
151 A.L.R. 824; Security Savings Bank v. California, 263 U.S. 282, 44 S.Ct.
108, 68 L.Ed. 301, 31 A.L.R. 391, or that he has left some caretaker under a
duty to let him know that it is being jeopardized. Ballard v. Hunter, 204 U.S.
241, 27 S.Ct. 261, 51 L.Ed. 461; Huling v. Kaw Valley Ry. & Imp. Co., 130
U.S. 559, 9 S.Ct. 603, 32 L.Ed. 1045. As phrased long ago by Chief Justice
Marshall in The Mary, 9 Cranch 126, 144, 3 L.Ed. 678, 'It is the part of
common prudence for all those who have any interest in (a thing), to guard that
interest by persons who are in a situation to protect it.'
22
In the case before us there is, of course, no abandonment. On the other hand
these beneficiaries do have a resident fiduciary as caretaker of their interest in
this property. But it is their caretaker who in the accounting becomes their
adversary. Their trustee is released from giving notice of jeopardy, and no one
else is expected to do so. Not even the special guardian is required or
apparently expected to communicate with his ward and client, and, of course, if
such a duty were merely transferred from the trustee to the guardian, economy
would not be served and more likely the cost would be increased.
23
practicable to give more adequate warning. Thus it has been recognized that, in
the case of persons missing or unknown, employment of an indirect and even a
probably futile means of notification is all that the situation permits and creates
no constitutional bar to a final decree foreclosing their rights. Cunnius v.
Reading School District, 198 U.S. 458, 25 S.Ct. 721, 49 L.Ed. 1125, 3
Ann.Cas. 1121; Blinn v. Nelson, 222 U.S. 1, 32 S.Ct. 1, 56 L.Ed. 65,
Ann.Cas.1913B, 555; and see Jacob v. Roberts, 223 U.S. 261, 32 S.Ct. 303, 56
L.Ed. 429.
24
25
Nor do we consider it unreasonable for the State to dispense with more certain
notice to those beneficiaries whose interests are either conjectural or future or,
although they could be discovered upon investigation, do not in due course of
business come to knowledge of the common trustee. Whatever searches might
be required in another situation under ordinary standards of diligence, in view
of the character of the proceedings and the nature of the interests here involved
we think them unnecessary. We recognize the practical difficulties and costs
that would be attendant on frequent investigations into the status of great
numbers of beneficiaries, many of whose interests in the common fund are so
remote as to be ephemeral; and we have no doubt that such impracticable and
extended searches are not required in the name of due process. The expense of
keeping informed from day to day of substitutions among even current income
beneficiaries and presumptive remaindermen, to say nothing of the far greater
number of contingent beneficiaries, would impose a severe burden on the plan,
and would likely dissipate its advantages. These are practical matters in which
we should be reluctant to disturb the judgment of the state authorities.
26
27
are at hand, the reasons disappear for resort to means less likely than the mails
to apprise them of its pendency.
28
The trustee has on its books the names and addresses of the income
beneficiaries represented by appellant, and we find no tenable ground for
dispensing with a serious effort to inform them personally of the accounting, at
least by ordinary mail to the record addresses. Cf. Wuchter v. Pizzutti, supra.
Certainly sending them a copy of the statute months and perhaps years in
advance does not answer this purpose. The trustee periodically remits their
income to them, and we think that they mgith reasonably expect that with or
apart from their remittances word might come to them personally that steps
were being taken affecting their interests.
29
30
31
In some situations the law requires greater precautions in its proceedings than
the business world accepts for its own purposes. In few, if any, will it be
satisfied with less. Certainly it is instructive, in determining the reasonableness
of the impersonal broadcast notification here used, to ask whether it would
satisfy a prudent man of business, counting his pennies but finding it in his
interest to convey information to many persons whose names and addresses are
in his files. We are not satisfied that it would. Publication may theoretically be
available for all the world to see, but it is too much in our day to suppose that
each or any individual beneficiary does or could examine all that is published to
see if something may be tucked away in it that affects his property interests.
We have before indicated in reference to notice by publication that, 'Great
caution should be used not to let fiction deny the fair play that can be secured
only by a pretty close adhesion to fact.' McDonald v. Mabee, 243 U.S. 90, 91,
37 S.Ct. 343, 61 L.Ed. 608, L.R.A.1917F, 458.
32
We hold the notice of judicial settlement of accounts required by the New York
Banking Law 100-c(12) is incompatible with the requirements of the
Fourteenth Amendment as a basis for adjudication depriving known persons
whose whereabouts are also known of substantial property rights. Accordingly
the judgment is reversed and the cause remanded for further proceedings not
inconsistent with this opinion.
33
Reversed.
34
35
36
These common trusts are available only when the instruments creating the
participating trusts permit participation in the common fund. Whether or not
further notice to beneficiaries should supplement the notice and representation
here provided is properly within the discretion of the State. The Federal
Constitution does not require it here.